Publicly Held Quantum: ‘We Owe It To Our Employees’ To Take $10M Coronavirus Small Business Loan

‘Without it, we would most certainly be forced to reduce headcount,’ a company spokesperson says.

Quantum Corp., a publicly traded data archiving and storage company with a market value of nearly $160 million, defended its decision to take a $10 million loan through the federal Payroll Protection Program (PPP) set up to help small businesses.

Quantum's $10 million PPP loan is saving American jobs at Quantum, a company spokesperson told CRN via email.

"Without it, we would most certainly be forced to reduce headcount. We owe it to our employees—who’ve stuck with us through a long and difficult turnaround—to do everything we can to save their jobs during this crisis," the spokesperson told CRN Thursday.

[Related: House Passes Paycheck Protection Program Expansion: $310B Boost To Small Biz]

Quantum is considered a small business according the North American Industry Classification System, or NAICS, under NAICS code 334112 for Computer Storage Device Manufacturing Industry companies with up to 1,250 employees, the spokesperson said.

"Quantum qualifies for the PPP, which allows businesses in the Computer Storage Device Manufacturing industry with fewer than 1,250 employees to obtain loans of up to $10 million to allow companies to continue to employ their workers as they manage the business disruptions caused by the COVID-19 pandemic," the spokesperson said.

A number of large public companies have come under fire for applying for loans from the PPP, part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted by Congress to help bring financial relief in the midst of the coronavirus pandemic. Several companies, including publicly listed outfits like Ruth’s Chris and Shake Shack have said they will repay the loans.

Guidance issued by the U.S. Department of Treasury Thursday said borrowers had to “certify in good faith that their PPP loan request is necessary” to be eligible and added, “It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”

Large public companies have two weeks to return the funds without consequences. “Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith,” according to the guidance.

When asked after the release of the Treasury’s new guidance whether Quantum will return funds from the PPP, the spokesperson referred CRN to the company's original statement about why it took out the loan.

The PPP, administered by the Small Business Administration, originally included $350 billion for low-interest loans primarily meant to help small businesses cover the costs of keeping employees on staff. The loans are eligible to be forgiven if businesses adhere to the program’s guidelines on how and when to utilize the money.

However, that program ran out of money within two weeks as it was overwhelmed by the number of businesses applying for relief.

At least 94 publicly traded companies disclosed that they received aid via the PPP, some with valuations over $100 million, according to the Associated Press. A list of those companies compiled utilizing data from Morgan Stanley and regulatory filings was published this week by several media sources, including CNBC and MarketWatch.

Quantum, San Jose, Calif., employs about 800 people globally, including 550 workers in the U.S. Its stock Friday closed down $0.25 at $4.00, a drop of 46 percent since the beginning of this year.

Another public enterprise technology firm, Veritone, a Costa Mesa, Calif.-based developer of a proprietary operating system for artificial intelligence, also appeared on CNBC’s list of public companies with a market value of over $100 million that received loans.

Veritone did not respond to a CRN request for comment.

The 277-employee company last week said in a press release that it received a total of $6.5 million in loans from Sunwest Bank under the PPP. Veritone Chairman and CEO Chad Steelberg said in the statement that small businesses are vital to the nation’s economy.

"We are grateful the CARES Act established a safety net to help companies like Veritone weather the significant disruption and uncertainty associated with the COVID-19 pandemic. This loan, together with our cost savings initiatives, will help us to continue operations without salary reductions, layoffs or furloughs, despite this dynamic and challenging economic environment," Steelberg said in the statement.

Others on the list include a wide range of public companies in the technology, travel, metalworking, medical device, pharmaceutical, and hospitality industries.

The U.S. Senate and House of Representatives Thursday added $310 million in new PPP funding, and President Trump Friday approved the addition.

Paul Evans, founder and principle architect at Daystrom Technology Group, a San Mateo, Calif.-based solution provider and Quantum channel partner, told CRN that he doesn't fault Quantum for applying for a PPP loan if the vendor is legally within its rights to do so, but suggested that it should instead tap into credit lines not available to most small businesses.

"For truly small businesses, the PPP is everything, while for Quantum it's one of hopefully multiple options," he said. "That said, I've not walked a mile in their shoes, and if PPP was their only option to save the company, then Quantum management was correct in pursuing that path... After all, keeping companies alive through this is the basic point of the CARES package."

Another Quantum solution provider, who asked to remain anonymous, said Quantum and others had every right to follow the law and ask for the PPP loan given the way the program was set up.

"The fact that Quantum and others qualify under SBAs guidelines as small businesses is the actual issue," the solution provider said. "They are most certainly not a small business by my definition, and probably by most reasonable business owners' definitions, of a small business. Congress could have easily narrowed the scope of the PPP program to focus on their intended recipients. They chose not to."